Operations and Supply Chain Management

1. Outdoor-gear co. competes on durability w/ lifetime warranty; premium prices. New plant manager (evaluated on cost/unit) switches to cheaper fabric & shortens quality testing. Unit costs -9%, warranty claims double, reviews mention early failures. What most directly explains the problem? A) Ops strategy emphasizes quality, business strategy emphasizes cost/lower prices B) Business strategy emphasizes quality/durability, ops strategy emphasizes cost reduction C) Corporate strategy emphasizes durability, ops emphasizes geographic expansion D) Marketing emphasizes warranties, finance emphasizes new segments E) Business strategy emphasizes cost, ops emphasizes supplier consolidation

B — Business strategy = quality/durability; operations strategy = cost reduction. (Topic 1: strategic alignment) Ops was rewarded on cost and cut quality. A is a reversal; C, D, E bring in things not in the scenario.

2. Online retailer promises same-day delivery for orders before noon. Warehouse workers evaluated on picks per hour, so they batch similar items. Picks/hour rises but same-day orders miss the afternoon truck. Which action most directly addresses the problem? A) Add more pickers to raise picks/hour B) Change promise to next-day C) Buy automated picking equipment for faster batching D) Revise performance measures to reward on-time fulfillment of same-day orders, not picking volume alone E) Increase warehouse inventory

D — Revise metrics to reward on-time same-day fulfillment. (Topic 1: misaligned KPIs) People follow their metrics, so fix the metric. A & C make batching worse; B changes strategy to fit ops (backwards); E ignores batching.

3. Electronics retailer's redesigned website halves checkout time; online orders +35%. Within 2 months satisfaction falls — fulfillment can't ship on time, returns take weeks. Marketing says site was a success (conversion up). Which conclusion best follows from value-chain reasoning? A) Marketing & sales improvement created demand that connected activities (outbound logistics, service) weren't aligned to support B) Judge site on conversion rate since marketing is a primary activity C) Satisfaction fell because site tech is more advanced than competitors' D) Immediately outsource outbound logistics to cheapest carrier E) Support activities never affect satisfaction

A — Improvement created demand that linked activities (outbound logistics, service) couldn't support. (Topic 2: linkages) B is a local metric; C & D unsupported; E uses the absolute 'never.'

Three regional grocery chains buy the same inventory software and self-checkout from the same vendor. Costs fall at all three. Two years later none gained share and margins are nearly identical. Most accurate explanation?

A) Software failed—no chain hit max utilization

B) Should have bought more advanced tech than competitors

C) Adopting the same best practices improved operational effectiveness but didn't differentiate because competitors could copy it

D) Cost reduction never creates advantage

E) Support activities like tech development can't create advantage in retail

C — Operational effectiveness ≠ strategy; copyable best practices don't differentiate. (Topic 2) A is a utilization distractor; B 'more advanced tech' trap; D & E are absolutes.

5. Startup developing a wearable medical monitor; sensors, battery, software not yet reliable enough for accuracy. Board pushes buying standard modules from several suppliers to cut costs. Prototypes fail because changes to one component affect others. Most appropriate conclusion? A) Increase modularity further B) Automate prototype assembly C) Vertically integrate distribution D) Expand product variety E) Since performance isn't good enough yet, an interdependent architecture is more appropriate until interfaces are well understood

E — Interdependent architecture until performance is good enough and interfaces are understood. (Topic 3: interdependence) Modularizing now is premature. A is the opposite; B, C, D confuse modularity with automation, integration, variety.

6. Power-tool maker's new drill: 42 parts, 9 fastener types, curved housing pieces, 3 specialized jigs, frequent rework. Customers like power & grip. Management wants lower cost without weakening those features. Which response most directly applies design-for-manufacturing? A) Reduce part count, standardize fasteners, simplify housing geometry while preserving motor performance & grip B) Add final inspection stations C) Offer more color/grip variations D) Move assembly to lower-wage country E) Add more specialized jigs

A — Simplify & standardize while keeping function. (Topic 4: DFM) B inspects instead of fixing design; C adds variety; D changes location not design; E adds more tooling.

7. Manufacturer installs a digital twin; months later predictions often wrong. Technicians enter maintenance records inconsistently and many older machines lack sensors. Some managers say digital twins don't work in manufacturing. Most accurate explanation? A) Buy a more advanced twin B) Twins only work in new facilities C) Replace technicians with automation to eliminate human error entirely D) The twin's value depends on accurate, complete data; gaps in records and sensor coverage limit it E) Increase machine utilization for more data

D — A model is only as good as its data. (Topic 5: technology limitations) A buys tech for a data problem; B & C are absolutes; E is a utilization distractor.

8. Regional plant managers are accountable for on-time delivery, but overtime >10 hrs/week needs a corporate VP's approval. VP reviews weekly, has little visibility into daily conditions. Orders are late while plants wait. Most accurate diagnosis? A) Add a second approval layer B) Authority isn't aligned with information and accountability; routine overtime decisions should sit with managers, within set limits C) Stop holding managers accountable D) Merge regions E) Increase labor utilization so overtime is never needed

B — Align decision rights: authority should sit with those who have the info and the accountability. (Topic 6: decision rights) A adds delay; C removes accountability; D is an org-chart fix; E ignores the approval delay.

9. Trend-driven teen apparel brand orders from distant low-cost factories 9 months before each season. Unit costs among the lowest, but it regularly marks down unsold styles and stocks out of popular ones. Most accurate conclusion? A) Negotiate even lower unit costs B) Adopt continuous-flow model C) The efficient, long-lead-time supply chain is misaligned with volatile demand; a more agile model fits better D) Make one precise forecast 9 months ahead E) Build bigger warehouses

C — Efficient long-lead-time chain doesn't fit volatile demand; go agile. (Topic 7/21: model fit) A & B double down on efficiency; D is the 'one precise forecast' trap; E treats the symptom.

10. Engineers design a kitchen appliance with 14 custom parts. Procurement sees the design only after it's final; 6 parts have one qualified supplier and long lead times. Expedited freight costs spike at launch. Which practice would most directly have prevented this? A) Negotiate harder after launch B) Use expedited freight as standard C) Add more custom parts D) Increase finished-goods inventory E) Involve procurement during design and substitute standard parts where possible

E — Involve procurement early; use standard parts. (Topic 7: design for supply chain) A, B, D are reactive; C makes it worse.

11. Luxury watchmaker known for precision of its proprietary movements. Consultant recommends outsourcing movement production (20% cheaper) and gift-box packaging. Best make-or-buy response? A) Keep movements in-house (core competency tied to advantage); packaging could be outsourced B) Outsource both C) Outsource movements, keep packaging D) Vertically integrate everything incl. retail E) Outsource all and rely on contracts

A — Keep the core competency; outsource commodities. (Topic 8: core competency) B decides on cost alone; C is a reversal; D & E are extremes.

12. Automaker lets its Tier 1 module supplier choose Tier 2 chip suppliers. Audit: Tier 1 chose the cheapest chip supplier despite quality problems and added hidden markups. Automaker's own chip-sourcing team has more expertise. Most appropriate approach? A) Delegate more upstream decisions to Tier 1 B) Replace Tier 1 but give new one same authority C) Increase chip inventory D) Move toward supply-chain make or hybrid by directly selecting/approving the Tier 2 chip supplier E) Stop using chips

D — Supply-chain make / hybrid: take direct control of Tier 2 selection. (Topic 8/9) Tier 1 was opportunistic and automaker has better skills. A & B keep the flawed structure; C treats symptom; E is extreme.

Manufacturer qualifies an alternate supplier for a critical motor component. In a disruption both primary and alternate stop shipping—both depend on the same rare-earth magnet producer. Which practice would most directly have prevented this?

A) Choose alternate on lowest price

B) Qualify alternate on form, fit, function only

C) Map supply chains of both primary and alternate during design to confirm they don't share upstream suppliers

D) Increase utilization at primary

E) Add finished-goods warehouse capacity

C — Map upstream (Tier 2) dependencies during design. (Topic 9/20: design-phase resilience) Shared Tier 2 = not real diversification. A is price-only; B lacks the resilience check; D & E don't touch the shared dependency.

14. Insurance claim passes through 7 departments; each finishes in under an hour and reports high productivity, but total processing takes 12 days. Each handoff = emailing the file and waiting. What should management do first? A) Speed up each department to <30 min B) Map the end-to-end process to find where claims wait between handoffs and remove non-value-added steps C) Hire more staff everywhere D) Buy faster computers E) Measure utilization more closely

B — Map the end-to-end process; the time is in waiting at handoffs. (Topic 10: process analysis) A speeds already-fast steps; C & D add resources to non-problems; E is a utilization distractor.

15. Machine shop once built fully custom parts; now makes 3 high-volume product families but is still arranged with all lathes in one area and mills in another. Parts travel back and forth; work piles up between departments. Which change most directly improves flow? A) More forklifts B) Fixed-position layout C) More lathes D) Larger storage between departments E) Reorganize into cells / product-oriented flow for the high-volume families

E — Cells or product-oriented layout for high-volume families. (Topic 11: layout) A & D treat symptoms; B is wrong layout type; C adds capacity when the problem is movement.

16. Construction firm's projects often delayed; site crews wait idle for design-change approvals from central engineering. Each change needs sign-off from 3 reviewers in sequence. Engineering headcount doubled last year but delays didn't improve. Most accurate diagnosis? A) Engineering is a resource bottleneck—hire more B) Site crews are the bottleneck C) Construction equipment is the bottleneck D) The sequential, centralized approval process is a workflow bottleneck needing redesign, not more resources E) Project software is the bottleneck

D — Workflow bottleneck, not resource bottleneck. (Topic 12) Doubling headcount with no improvement proves it. A is the resource trap; B's idle crews are a symptom; C & E lack evidence.

17. Commercial bakery's oven is the constraint. It sits idle 45 min at every shift change and lunch; ~8% of baked batches are scrapped for mixing errors found after baking. Manager proposes a $400,000 second oven. What first? A) Exploit the oven—stagger breaks so it runs continuously and check dough before it enters B) Elevate by buying second oven C) Speed up packaging D) Run mixers at max output E) Add storage near oven

A — Exploit before elevate: keep constraint running and don't waste it on bad dough. (Topic 13) B elevates too early; C improves a non-constraint; D floods the constraint; E treats symptom.

18. Plant improved uptime at its constraint (90 units/day). First station still releases material at full capacity (150/day). WIP builds throughout plant; lead times grow. Which action best applies TOC? A) Elevate the first station B) Raise release to 170/day C) Subordinate material release to the constraint's pace, keeping a small protective buffer before it D) Reward every station for max utilization E) Eliminate all buffer before the constraint

C — Subordinate (drum-buffer-rope): release at constraint's pace with a small buffer. (Topic 13) A & B release more work; D is the utilization trap; E is extreme.

19. Plant manager's bonus is based on average machine utilization. Utilization rises 72% → 91% over a year; shipments flat; WIP and finished goods +40%; lead times longer. Most accurate conclusion? A) Utilization must hit 100% before throughput rises B) Higher utilization at non-constraints increased WIP without increasing system throughput C) Utilization was measured incorrectly D) Extra inventory is an asset, so finances improved E) Demand forecast was inaccurate

B — Non-constraint utilization just builds WIP; it doesn't raise throughput. (Topic 14) A is an absolute; C unsupported; D is the 'inventory is an asset' trap; E blames an unmentioned forecast.

20. Snack company forecasts next quarter with a 3-year moving average. Marketing has a major national promotion planned and a key competitor just exited. Demand far exceeds forecast; stores run out. Most accurate conclusion? A) Use a 10-year moving average B) It was a supply planning failure C) Adopt one fixed forecast D) Reduce expected demand to fit capacity E) Forecast should have incorporated internal info (promotion) and external info (competitor exit), not just historical averages

E — Forecasts need internal + external information, not history alone. (Topic 15: demand data sources) A still history-only; B wrong—forecast failed; C fixed-forecast trap; D shrinks demand to fit capacity.

21. Furniture maker's forecast is accurate, but lead time for a key hardware component rises from 3 to 10 weeks. Planners keep ordering on the old lead time; lines stop waiting for hardware; orders ship late. Which planning activity was most deficient? A) Demand planning B) Facility layout C) Marketing planning D) Supply planning—failed to update material requirements and lead times to keep the plan feasible E) Constraint elevation

D — Supply planning. (Topic 16) Forecast was accurate; the material plan ignored new lead times. A blames an accurate forecast; B, C, E unsupported.

22. Sales (rewarded on revenue) books big orders for Product X. Operations (rewarded on unit cost) runs long batches of Product Y. Finance budgets on last year's mix. Result: excess Y, backorders on X, tight cash. Which process most directly prevents this? A) Give sales final authority over schedules B) Implement S&OP to reconcile sales, ops and finance into one plan with aligned goals C) Let ops plan independently on lowest unit cost D) Finance cuts budgets for both E) Increase safety stock for every product

B — S&OP: one integrated plan with aligned goals. (Topic 17) A & C let one function decide; D is a blunt cut; E 'every product' ties up cash.

23. Beverage company has a large excess of packaging. Procurement is rewarded on low unit cost and buys 6-month quantities for volume discounts. When the package design changed, 30% became obsolete. Most accurate conclusion? A) Excess is a symptom of a local incentive whose unit-cost savings created carrying and obsolescence costs elsewhere; procurement goals should reflect total cost and company plans B) Inventory eliminated supply uncertainty, so worthwhile C) Sell excess and keep current policy D) Expand warehouse space E) Consumer demand forecasting failed

A — Local incentive (unit cost) created carrying/obsolescence costs; measure total cost. (Topic 18: inventory root causes) B uses 'eliminated' (trap); C doesn't fix cause; D treats symptom; E confuses demand with procurement policy.

24. Toy maker earns 60% of annual sales in the 8 weeks before the holidays. For 2 years used a lag strategy (hire temps after orders surge); hiring/training takes 6 weeks. Lost sales as retailers switched to on-time competitors. Most appropriate capacity approach? A) Continue lag B) Average strategy C) Lead strategy—add capacity or build inventory ahead of the peak, since missing peak sales is costly and timing is predictable D) Reduce capacity E) Match capacity day by day

C — Lead strategy. (Topic 19) Predictable peak + expensive lost sales → build capacity ahead. A repeats the failure; B 'averages hide peaks' trap; D & E don't fit 6-week hiring time.

25. Paper-products company sells stable household staples plus seasonal designer-print napkins with highly unpredictable demand. Runs everything as lean JIT. Staples do well; napkins stock out or get marked down. Most appropriate approach? A) Switch everything to agile B) Stay lean and forecast napkins more precisely C) Discontinue napkins D) Make staples agile, napkins lean E) Hybrid: keep staples lean, apply agile practices (e.g., postpone printing until demand is clearer) to seasonal line

E — Hybrid: lean for stable demand, agile/postponement for volatile demand. (Topic 21) A adds cost to staples; B forecasts the unforecastable; C extreme; D reversal.

SA1. Boutique fitness chain promises personalized coaching & flexible class times. HQ requires a fixed standard schedule and raises class size 8 → 20 to cut costs. Cancellations rise. Diagnose & recommend (concept → diagnosis → recommendation → tradeoff).

CONCEPT: Misalignment between business strategy (personalization, flexibility) and operations strategy (standardization, efficiency). DIAGNOSIS: Fixed schedules and 20-person classes remove exactly what members pay for → cancellations. RECOMMENDATION: Restore flexible scheduling and smaller coaching ratios, or tie cost goals to retention, not cost alone. TRADEOFF: Higher labor cost per member vs. retention and ability to charge premium prices.

SA2. Car wash stages: prep 40/hr, wash 25/hr, dry 35/hr, detail 30/hr. Management adds a 2nd prep lane (prep → 60/hr). Throughput unchanged; line before wash grows. Identify constraint, explain failure, apply TOC steps.

CONSTRAINT: Wash (25/hr, lowest capacity). WHY IT FAILED: Added capacity at a non-constraint → only a longer queue before wash, no throughput gain. EXPLOIT: Remove wash downtime (off-peak maintenance, no idle gaps) and do prep checks so wash never processes a car twice. SUBORDINATE: Pace prep to the wash's rate. ELEVATE: Only if still needed, add a 2nd wash bay. REPEAT: Detail (30/hr) becomes the next constraint.

SA3. Company single-sourced a critical part from one low-cost overseas supplier and held almost no inventory (JIT). A port closure halted production for 6 weeks. Explain the tradeoff and recommend specific changes incl. costs.

CONCEPT: Efficiency vs. resilience — single sourcing + JIT minimized cost but left no slack (single point of failure). RECOMMENDATION: Targeted resilience for this critical part: qualify a 2nd supplier in a different region (verify no shared Tier 2 suppliers), hold strategic safety stock, consider long-term agreements. TRADEOFF/COSTS: Higher carrying costs, possibly higher unit prices, more supplier-management effort — vs. avoiding a 6-week shutdown. Apply only where risk is highest.

SA4. Fashion retailer deciding how much holiday inventory to buy. Explain 2 benefits and 3 costs of holding inventory, and recommend an approach.

BENEFITS: (1) Availability during peak demand — fewer stockouts/lost sales; (2) buffer against demand and supply uncertainty. COSTS (any 3): carrying costs; markdown risk after season; obsolescence of trend items; working capital tied up. RECOMMENDATION: Buy a moderate base quantity of core items; keep flexibility for trend items via smaller initial buys, reorder options or postponement; review demand signals during the season. TRADEOFF: Some stockout risk vs. large markdowns.